Markets make me nervous, why do they drop so fast sometimes?

Markets are simply auctions, real people buying and selling securities. When fear rises (see emotional investing FAQ and Financial Independence video), people in a panic are willing to sell shares at any cost. If there is a “buyer’s strike,” meaning that buyers are simply not interested in buying, a panic-seller must keep dropping his or her price until he/she attracts a buyer. At some point, prices go so low that the whole world (of stocks) is essentially “on sale” and non-buyers on the sidelines start to become buyers in order to purchase shares at bargain prices. That demand in the “auction” causes prices to go up, often times rising sharply after the market hits bottom. Just like any other auction. The question is… do you want to be in the panic group that pushes prices down for others to buy cheap? Or do you want to be in the profit group that benefits from sticking with your strategy and adding money too it, and benefiting from the eventual market recovery? WealthStep doesn’t recommend attempting market timing (studies indicate that is generally unsuccessful), however if you are regularly contributing to your 401k or personal retirement account, you will periodically be purchasing at bargain prices when the market cools, consistent with the stock/bond mix of your portfolio.